Girardi's future in the Bronx had been the subject of increasing conjecture after the Yankees missed the postseason this year and he was linked with a move back to the Chicago Cubs, where he began his playing career as a catcher in 1989.
But the 48-year-old brought an abrupt end to the rumours when he agreed to a four-year extension as skipper through to the end of the 2017 season.
"I feel very flattered and grateful that I have this opportunity and I look forward to it," Girardi said on a conference call.
Despite reports in the U.S. media that he was considering moving back to Chicago, Girardi said he never even spoke to the Cubs after his wife and children told him they wanted to stay in the Big Apple.
"There were some things that we had to work through but my family played an important role with this," Girardi said.
"We had to decide what was best for all of us ... so we put all that together and we're glad we're back."
Girardi has already been manager of the Yankees - one of the most highly scrutinized jobs in professional sports - for six seasons, steering the pinstripes to a record 27th World Series Championship in 2009.
He also won the World Series three times as a catcher with the Yankees, in 1996, 1998 and 1999, as part of a 15-year playing career that also included stints with the Cubs (twice), Colorado Rockies and St. Louis Cardinals.
"You hear stuff and you read things but our lives have been here for six years," Girardi said.
"Chicago was the team I grew up rooting for so Chicago will always a hold a special place in my heart but this place is special to me too.
"This place has been really good to us and our family and my wife and our kids are established here."
Girardi began his managerial career with the Florida Marlins, winning the National League Manager of the Year award in 2006, before taking charge of the Yankees in 2008.
He won a World Series in his second year as manager of the Yankees and led the team to the playoffs for four straight seasons before they failed to make it this year after being plagued by injuries to key players.
"It's a special place to manage because of the opportunities you have every year and the tools that they give you," he said.
"I wouldn't have come back if I didn't think we could win a championship.
"I know there's a lot of work to do and a lot of holes but I have faith in this organization."
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